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The business case for going green

Brian Kaneb | Wednesday, October 26, 2011

Since the environmental movement started, most businesses have viewed the process of “going green” as a cost rather than an investment. This sentiment is especially magnified in the United States, where corporate environmental responsibility is generally held to a low standard. This most likely stems from the public’s skepticism — just 48 percent of Americans believe human activities play a role in climate change, a 12 percent decrease from 2008. Yet even if the public is undecided about the science behind climate change, it is financially wise for companies to take initiative. Businesses must cater to the consumer, and the demand for environmentally responsible companies will only increase over time. Also, even the simplest of internal efficiency adjustments can decrease unwanted spending while helping the environment at the same time. On top of this, it is also wise for the private sector to invest in green energy to prepare for inevitable environmental legislation like cap and trade.

Though critics may say that my idea is simply wishful thinking, real life examples seem to suggest otherwise. Just look at Nokia, the world’s largest manufacturer of mobile phones, which has been particularly active in the green movement. Nokia claims to have exceeded its goal of reducing facility related carbon dioxide emissions by 18 percent in 2010 relative to their 2006 level. One major way in which they do so is by modifying actual product production. Since 2005, they have saved 240,000 tons of paper by dramatically reducing the packaging size of their most affordable products. This helps Nokia hit two birds with one stone, lowering both production and transportation costs. Theoretically, according to their most recent sustainability report, they now only need one-third of the number of trucks to transport these products. They are also committed to ensuring that all of their main suppliers have set energy efficiency and carbon dioxide emission reduction goals, thus forcing Nokia’s partners to adapt to a high level of corporate social responsibility.

Staples, the world’s largest office supply company, is another great example of a progressive company. Recently ranked as the fourth largest purchaser of green power in the retail industry by the EPA, it constantly receives awards and recognition for its approach to sustainability. Just this year, Staples more than doubled its annual investment in wind projects, purchasing approximately 340 million kilowatt-hours in renewable energy certificates. Not only does this prevent 62,000 metric tons of carbon dioxide equivalents from entering the environment, it also helps it “drive environmental and cost reduction benefits,” according to Bob Valair, the director of energy and environmental management for Staples. In an intriguing statement, Mr. Valair referred to buying renewable energy as an “investment” rather than a “cost.” But why?

To reference the great Bob Dylan song, “the times they are a-changin’.” In order to prepare for higher government standards, the smartest companies are in the process of adopting “pre-compliance” environmental policies. In essence, such companies will gradually decrease their greenhouse gas emissions to prepare themselves for future government policies. By participating in such a long-term investment, they will develop a competitive advantage over businesses that are unprepared for such a dramatic change.

Much of corporate America was first introduced to the term “pre-compliance” around 2008, when it looked like Congress might implement a national cap-and-trade system for greenhouse gases. Accordingly, because of high demand in America, the value of the worldwide carbon market grew nearly 217 percent from the previous year. As we all know, the federal government effectively shut down the potential for a cap-and-trade system less than a year later. However, this spike shows that government compliance should not be taken lightly. Companies should constantly be preparing for new environmental policies in order to facilitate a smooth future transition.

Whether or not one personally believes in global warming, it is also necessary to recognize that businesses must cater to the growing demand for green companies. Whereas a company that ignores energy efficiency will undoubtedly receive bad publicity, more progressive competitors will only see their reputations increase. Because reputation is important to the consumer, being environmentally friendly often helps companies expand their products.

In 2011, according to Landor Associates, 73 percent of consumers felt that it was “very important” or “somewhat important” for a company to be environmentally friendly. What’s more, a recent Yahoo! Finance-commissioned study found that the youth (ages 18 to 35) is “highly influenced to make green choices to help their personal image.” As the current youth ages, this poll clearly shows that the demand for green products and companies will gain momentum. Though the movement was hampered by the recession — as was every other industry — it survived and proved to be resilient. This is most likely due to the fact that, despite the recession, at least 55 percent of consumers are willing to spend more on a product “because it is green,” according to the previously mentioned Landor Associates poll.

The base of support for green products is astounding, and tapping into it provides great opportunities for the private industry.

Brian Kaneb is a sophomore. He can be reached at bkaneb1@nd.edu

The views expressed in this column are those of the author and not necessarily those of The Observer.